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The 3 Cs to consider when pricing your product or service.

When you start out in business one of the keys to your growth and success is knowing how much to charge for your product or service. If your prices are too high you could put off prospective customers; if they are too low you may find it difficult to make a profit.

Here are 3 Cs you need to consider when pricing your product or service.

Customer – Who is your customer? Have you done your market research to determine how much they would be willing to pay for your product or service? Which customers do you want to attract? Is your product or service aimed at a smaller group of customers willing to pay a higher price for a premium offering? Or does it have mass appeal? In which case you might be looking more at budget pricing.

Competition – You need to analyse your competition; and their pricing structure. Because you can bet your bottom dollar that’s exactly what your potential customers will be doing. That’s not to say you should always price match; indeed this can be a risky policy for small businesses as competitive pricing results in a narrower profit margin, making your business vulnerable if costs rise. As a smaller business think about value pricing, what are you offering that your competitors are not?

Costs – A fundamental consideration in pricing is that you need to cover your costs and make a profit. After all, we’re all in business to make money. How much does your product cost you? Don’t forget that the cost of a product is more than the actual cost of an item, you’ll need to factor in your overheads. Here at Johnston Associates South we can help you determine the prices you should be setting for your product or service by ensuring you have a fuller understanding of your costs and overheads.

Pricing structure is not just important for those of you starting out in business, it’s something you need to review on a regular basis, contact us to find out how our business consulting division can help you with this.